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SEISS: Meaning of adversely affected explained

A key condition for claiming the SEISS grants is that the business must be adversely affected by the coronavirus pandemic. Rebecca Cave answers your questions about what this means in practice.

27th Aug 2020
Tax Writer Taxwriter Ltd
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The HMRC directions for the first SEISS grant and the second SEISS grant both require that a claim may only be made if the business has been “adversely affected by the health, social and economic emergency in the United Kingdom resulting from coronavirus and coronavirus disease”.

Unfortunately, the drafters of the directions neglected to define what they meant by 'adversely affected', so this term was left to HMRC to explain in guidance

What do the words mean?

Where there is no legal definition of a term in law you have to interpret the words as they would be commonly be understood in everyday English.

To be 'affected' means to be changed by something, in this case by the coronavirus pandemic, and the direction tells us this can be through any of the three concurrent emergencies: health, social or economic.

How negative?

The term “adversely” implies the change must be in a negative direction, but how negative?

HMRC recently confirmed that there is no minimum threshold over which the business income or costs need to have changed. Thus, even a small drop in sales or increase in costs will allow the trader to honestly assess that their business has been “adversely affected”.       

Ramesh Nagarajan asked: My turnover is 5% down compared to last year. Am I adversely affected by Covid19?

If you can tie the 5% decrease in your turnover to the coronavirus pandemic, your business has been adversely affected and you do qualify for the SEISS grants assuming you meet the other conditions. 

Timing issues

The first and second SEISS grants apply to different periods for which the business must be adversely affected.

The direction for the second SEISS grant clearly states that the business must be adversely affected on or after 14 July 2020. As applications for the second SEISS grant close on 19 October 2020, the adverse effect must occur before that date.

The direction for the first SEISS grant did not specify a timescale, but the tense implies a past event before the claim is submitted. As applications for the first SEISS grant closed on 13 July 2020, the adverse effect would have to apply sometime between mid-March 2020 when businesses started to shut down, and 13 July 2020.       

Mark Nejad asked: Are bookkeepers regarded as adversely affected if quite a few of their clients are not asking for the service due to inability to pay the fees, but expected to eventually ask for the service due to the January SA return due date?

A business in this situation is adversely affected, because their turnover between March and October has been reduced below what would normally be expected. It is irrelevant that the bookkeeper optimistically expects the demand for their services to increase significantly after October 2020.

Evidence

HMRC is clear that the taxpayer should make an honest assessment of the performance of its own business. However, the business owner should also keep records of how the business was adversely affected. These records could include:

  • Dates when staff were unable to work due to illness, shielding or caring responsibilities
  • Dates when the business was physically closed due to lockdown restrictions
  • Receipts for additional costs incurred
  • Contemporaneous sales records that show a reduction for particular periods  

Jilbo asks: Some of my clients are saying: How would HMRC know if I wasn't affected at 14 July or a later date? They're not going to be able to check everyone.

As part of the SEISS claim, HMRC asks the taxpayer to confirm that their business has been adversely affected by coronavirus.

This is similar to the declaration made on any tax return – that the statements made in the document are true. The first point of the HMRC Charter is that HMRC will assume the taxpayer is telling the truth unless it has a good reason to think otherwise and taxpayers are truthful and act within the law. If taxpayers set out to be dishonest in their declarations to HMRC, then they undermine the bedrock of the tax system.     

SimonStone asks: I have a client whose profits will be increased on the same period last year, and when looking at 2020/21, will be higher than 2019/20. However, she says that profits would have been even higher after 14 July, if not for covid19.  Is she eligible to claim the SEISS grant?    

If the client can show that her costs have increased in 2020/21 compared to 2019/20 because of the pandemic, she would qualify for the SEISS grant. The test, as HMRC set it out, is that either business income is lower or costs are higher. The key will to show why and how costs increased during the pandemic.

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Replies (23)

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By Rammstein1
27th Aug 2020 14:59

Good article.

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By memyself-eye
27th Aug 2020 17:20

This is going to be a bit like one of those UTube 'traffic cops' episodes.
Police decide to stop a motorist:
"your driving was erratic"
"How so officer?"
"well I saw it was...."
"was I speeding?"
"err.... no"
"Am I drunk
"No"
"Is the car unroadworthy"
"No"
"So it's your OPINION then?"
"well, yes"
"no basis in law then?"
"Law? what's that?"
I doubt HMRC will ever try to prove a business was not affected by covid 19.

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RLI
By lionofludesch
27th Aug 2020 17:39

I don't normally pick up on typos - we all make them - but "contemptuous sales records" made me smile.

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Replying to lionofludesch:
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By MJShone
28th Aug 2020 08:11

Me too!

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By Paul Crowley
27th Aug 2020 18:58

Much appreciated. Cannot believe many self-employed not able to find appropriate timely evidence

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By CWservices6064
27th Aug 2020 20:21

So, anyone buying PPE required to continue working would be able to make a claim based on additional costs incurred relating directly to Coronavirus irrespective of a change in sales/profitability?

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Replying to CWservices6064:
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By memyself-eye
27th Aug 2020 22:16

err...yes.

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Replying to CWservices6064:
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By John Isabel
28th Aug 2020 10:03

Yes in most cases but in some id say perhaps not.

I have been telling clients it is up to them to decide, and trying to avoid (where possible) giving too much guidance on that decision, but did talk through it with a few and one is relevant to your point here.

Client visits people's homes and charges (say) £150 a pop for the work he does. He has had to buy some PPE and incur some consumables costs to keep working. Lets say it costs £5 per job for that.

At this stage, he has clearly been (pretty mildly) adversely affected by Covid as he is incurring additional costs. I say mildly, as his SEISS grant will more than cover these costs, but hey-ho, them's the rules.

He was considering charging £155 per job (or even £160) to cover the PPE and consumables cost. Had he done so, then whilst he would have been paying out more, he would have been making the same (or more) profit per job and so wouldn't have been adversely affected at all. Whether he could have still claimed on the HMRC guidance is up for debate. I guess it depends on whether you feel he is 'incurring' the additional cost at all, if he is passing that cost on.

I didn't give a definitive answer to him but having gone through the above he felt it would be better not to re-charge, since HM Gov was effectively picking up the tab anyway.

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Replying to John Isabel:
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By CWservices6064
28th Aug 2020 10:12

Thanks for the reply.

I've done the same in terms of pointing clients to official guidance and reputable opinion whilst making it clear that to claim or not to claim is their decision.

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Replying to John Isabel:
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By CWservices6064
28th Aug 2020 10:12

Thanks for the reply.

I've done the same in terms of pointing clients to official guidance and reputable opinion whilst making it clear that to claim or not to claim is their decision.

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Replying to CWservices6064:
By tonyaustin
28th Aug 2020 10:08

Does the cost of PPE count? Is it wholly and exclusively incurred or is there duality of purpose?

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Replying to tonyaustin:
By birdman
28th Aug 2020 10:14

Most PPE protects the customer, not you, so I'd say no duality.

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Replying to tonyaustin:
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By CWservices6064
28th Aug 2020 10:16

It's specifically mentioned in HMRC guidance so should be ok!

Your business could be adversely affected by coronavirus if, for example:
• you’re unable to work because you:
• are shielding
• are self-isolating
• are on sick leave because of coronavirus
• have caring responsibilities because of coronavirus
• you’ve had to scale down, temporarily stop trading or incurred additional costs because:
• your supply chain has been interrupted
• you have fewer or no customers or clients
• your staff are unable to come in to work
• one or more of your contracts have been cancelled
• you had to buy protective equipment so you could trade following social distancing rules

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Replying to tonyaustin:
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By lionofludesch
28th Aug 2020 10:35

tonyaustin wrote:

Does the cost of PPE count? Is it wholly and exclusively incurred or is there duality of purpose?

Of course it counts.

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By Nick Freeman
28th Aug 2020 11:22

It is a complete nightmare trying to determine eligibility of the SEIIS grant claim, especially when there have been positive and negative effects caused by Covid. I have a client retail pet store with the following turnover pattern:
- 2 weeks before lockdown, shop sales go ballistic due to panic buying.
- Shop closes to customers and sales are by order and collect at the doorstep, or delivery by van. Turnover is reduced substantially, but then starts to increase as customers get used to the lockdown restrictions.
- Gradual increase in web sales as more people are now using the internet
- Some additional costs incurred due to Covid, notably delivery costs (postage & fuel)
Presumably the net effect needs to be considered over the time span involved for assessing each grant application, but do you include the pre shop closure sales as the date of closure of the shop is the first date that Covid directly affected the business.

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By sumo69
28th Aug 2020 11:28

So the fact I helped with the kids schooling until they broke-up (23rd July) and I have bought £10 of masks for use when meeting clients means I qualify?
I know there is a moral rather than legal viewpoint on claiming - I am still figuring out whether I am happy with both!

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Replying to sumo69:
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By Paul Crowley
29th Aug 2020 20:25

Unless the moral viewpoint is mentioned in Hansard, the legal prevails

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By emilefrode
28th Aug 2020 11:44

I have a client who is an Ebay trader and his sales have been unaffected but he has not been able to replenish his stock. This is likely to impact his sales going forward. He usually buys stock at boot sales and record fairs etc and had not been able to do this until recently. He is also expecting that prices will be higher until we are through the pandemic. He has claimed the first grant but will not be claiming the second one. I think he has got it about right. Does anyone have any views on this?

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Replying to emilefrode:
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By Rammstein1
28th Aug 2020 13:46

That sounds about right to me.

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By martinhayward
28th Aug 2020 17:24

Basically by putting in no minimum and using the words "adversely" affected I cant see how 99% of businesses can't claim and I don't think HMRC will have a leg to stand on if they try to reclaim any of it. Surely the purchased of hand sanitiszer is an extra cost that allows a claim! Whilst many businesses have no doubt been severely affected for just as many businesses, especially those self employed in the construction industry, the governments generosity has been Christmas come early. They had an excuse with the first tranche of grants as it could be argued they needed o get the money out quickly. But they had 4 months to devise a better system. Shocking mismanagement.

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By martinhayward
28th Aug 2020 17:24

Basically by putting in no minimum and using the words "adversely" affected I cant see how 99% of businesses can't claim and I don't think HMRC will have a leg to stand on if they try to reclaim any of it. Surely the purchased of hand sanitiszer is an extra cost that allows a claim! Whilst many businesses have no doubt been severely affected for just as many businesses, especially those self employed in the construction industry, the governments generosity has been Christmas come early. They had an excuse with the first tranche of grants as it could be argued they needed o get the money out quickly. But they had 4 months to devise a better system. Shocking mismanagement.

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By Arcadia
29th Aug 2020 16:21

I think Rebecca's article is pretty clear - there need be only minimal adverse effect to be eligible to claim. There is no moral dimension to deciding whether to claim. The objective is to put cash into the economy. Everyone who can possibly do so should do their duty by claiming the cash and spending it.

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By birdman
29th Aug 2020 21:42

I have discussed the "moral issue" of claiming SEISS with a few clients now, with the starting point that even a tiny negative impact means a claim would be valid. What I say to them is that the decision is theirs, but the grant will soon disappear, it's unlikely to be repeated, and what would they do if the full financial impact on their business has merely been delayed, with a slump brought on by customer redundancies when furlough ends, or a second wave, or any other unknowable? Claim it, tuck it away if not needed now, and see how it all pans out.

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